SB 227-MUNICIPAL PROPERTY TAX LEVY LIMITATION SENATOR KIM ELTON, sponsor of SB 227, stated if the initiative passes it will accomplish three things. It will replace the current 30 mill or 3 percent limitation with a 10 mill or 1 percent levy, it will require payments on bonded indebtedness to be included within the tax cap, and it will prohibit local property assessments from rising more than 2 percent annually. SB 227 allows local voters the ability to set a tax cap of higher than 10 mills in a general election. SB 227 prohibits people in one municipality from setting the mill rate for another municipality. If the initiative passes municipalities have the ability to lower the mill rate, but can't raise the mill rate above 10. SB 227 also exempts school bond debt from the tax cap. SENATOR PHILLIPS asked if SB 227 would change the intent of initiative. SENATOR ELTON stated no. SB 227 loosens provisions of the initiative, and moves school bond debt out from under the tax cap. The Alaska Municipal League agrees that people in one part of the State should not govern the tax cap in individual communities in other parts of the State. Each community's voters should have the option to determine mill rates and taxes for that community. Financial pressure will be added to municipalities if the initiative passes, and the public doesn't have the option to vote. SENATOR ELTON gave examples of property values plummeting. SB 227 will not change the initiative, it gives alternative options if the initiative passes. The Alaska Constitution states Alaska should act within its powers to "provide for maximum local self government with a minimum of local government units, and to prevent duplication of tax levying jurisdictions." Without an opportunity for local governments to set appropriate tax rates, the initiative will discourage consolidation of local government units and local taxing authorities. Number 174 SENATOR PHILLIPS stated local governments should be educated on the impacts of the initiative and SB 227. SENATOR ELTON agreed and stated people in unorganized boroughs should not be allowed to dictate what happens in other municipalities in the State. The legislature should not focus on tactics against the initiative but should create a safety net for the people in municipalities. That is what SB 227 represents. SENATOR PHILLIPS stated SB 227 would be a mechanism to prepare for the initiative. VICE-CHAIR MACKIE stated SB 227 gives people more reason to vote for the initiative and fall back on SB 227, instead of trying to fight the initiative. SENATOR ELTON stated SB 227 won't make a difference in voter behavior. People will vote for the initiative or not, but SB 227 will go into effect if the initiative passes. VICE-CHAIR MACKIE asked, if the initiative gets voted down whether SB 227 will go into effect. SENATOR ELTON stated it will not. Some cities are contributing more than the 4 mill property tax for their local contribution to schools. A 10 mill tax limit with no safety net will pressure municipalities to lower the 4 mill local contribution to schools to still provide for other services. SENATOR PHILLIPS stated SB 227 isn't a safety net, it represents a transition. He asked how the votes were broken down to represent each region of Alaska. SENATOR ELTON stated most opinions came from Southcentral Alaska. Number 333 MS. BONNIE WILLIAMS, Chair of finance committee for Fairbanks/North Star Borough, stated support for SB 227. If the initiative passes it will negatively affect Fairbanks' current year budget. The schools, road service areas, and fire departments would suffer the most if the initiative passes. The Fairbanks North Star Borough has voted for a revenue cap which prohibits the borough from spending above the current year revenue; except for inflation, new construction, and new bonds that are voter approved. Ms. Williams referred to California's tax initiative that went into effect in 1978. From 1978 to 2000 California's population has grown from 22 million to 31 million with no new schools being built to accommodate those children. Number 420 MR. TED SMITH, Mayor of City of Petersburg, stated support for SB 227. SB 227 allows municipalities control over their taxation destiny. Petersburg already has a 10 mill rate limit that was set at the local level and can be changed by a vote of the people. MR. GENE DUSEK, Director, Office of Management & Budget for the Municipality of Anchorage, stated support for SB 227. Anchorage mill rates for 2000 are estimated to be 17.91 mills. The school board is asking the assembly for a mill rate of 8.09 mills. The mill rate for city services differs from area to area, the average mill rate is 9.82 mills. The total debt, excluding debt services, is 14.66 mills. That will need to be cut to 10 mills if the initiative passes. Mr. Dusek referred to charts given to the committee. SENATOR PHILLIPS moved SB 227 out of committee with individual recommendations. Without objection, the motion carried.